India's current account deficit rose to $ 8.2 billion (1.6% of Gross Domestic Product) for third quarter ended December 2014 from $ 4.2 billion (0.9% of GDP) for October-December 2013.
CAD narrowed in Q3 when compared to deficit in the second quarter (September 2014) which was $ 10.1 billion (2 % of GDP). For nine months ended December 2014, CAD narrowed to $ 26.2 billion from $ 31.1 billion in April-December 2013.
The Balance of Payments (BOP) was also in positive territory. The accretion to country's foreign exchange reserves was $ 13.2 billion in reporting quarter, down from $ 19.1 billion in Q3 of 2013-14.
RBI in a statement said the reduction in the CAD in Q3 2014-15 over Q2 was primarily due to pick-up in net services exports. The uptick in net services exports reflected improvement in earnings from travel and software services and lower outflows on account of profit, dividend and interest.
Rupa Nitsure Rege, chief economist, L&T Finance Holdings Ltd said the current account deficit was muted in the third quarter due to fall in imports. This should not give us any sense of complacency as it is effect of positive external factors like fall in global crude oil prices. What is worrisome is the contraction of India's merchandise exports in Q3.
The merchandise trade deficit (US$ 39.2 billion during Q3 2014-15) widened on a q-o-q basis on account of a larger decline in merchandise exports (7.3%) than in merchandise imports (4.5%); in terms of y-o-y changes too, the trade deficit in Q3 2014-15 widened due to a decline in exports (1.0%), while imports increased (4.5%).
The accretion in Q3 of FY14 was bolstered by special non-resident and banks' overseas borrowings.
On BOP, RBI said the gross private transfer receipts, remittances by Indians employed overseas, amounted to $ 17.5 billion in Q3. They provided sustained support to the BoP with a share of 12.6% of current receipts, broadly the same level as in the preceding quarter and a year ago. The accretion in Q3 of FY14 was bolstered by special non-resident and banks' overseas borrowings.
In the financial account, net inflows of foreign direct and portfolio investment were somewhat lower on a quarter over quarter basis. The net loans availed by banks increased by $ 6.6 billion mainly due to inward repatriations of assets held by them abroad. When compared to year on year basis, the level of net financial flows was broadly sustained, notwithstanding the inflows of $ 21.4 billion garnered in Q3 of 2013-14 under the non-resident deposit schemes, RBI said.
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